04 Apr, 2022

Cost of living increase

04 Apr, 2022

From 1 April, fuel bills for about 18 million households on standard tariffs will go up by an average of £693 when the energy cap goes up. Some 4.5 million prepayment customers will see an average increase of £708. Fuel prices may go up again in October when the energy cap is next reviewed.

The rate of VAT – the tax paid when buying goods and services – is also going up for some businesses. The government reduced the rate paid by hospitality and tourism firms to 12.5% in July 2020, to help them recover from the pandemic. However, from 1 April, VAT returns to the standard rate of 20%. Some companies have said they will pass this increase on to customers.

On 6 April, companies, workers and the self-employed will start paying 1.25p more in the pound in National Insurance contributions under the Health and Social Care Levy.

Air passenger duty and vehicle excise duty rates are also increasing this month, as is the cost of stamps, and water bills in England and Wales.

Food prices have also gone up sharply. Petrol prices have risen to record levels.

Higher interest rates are making mortgage payments more expensive for some homeowners.

Regulated rail fares in England have already gone up by up to 3.8% in England and Wales, the highest fare rises for nine years.

Inflation is measured by a body called the Office for National Statistics (ONS), which notes the prices of hundreds of everyday items, known as the “basket of goods”.

The basket is constantly updated. In 2022, items such as tinned beans and sports bras were added, reflecting a rising interest in plant-based diets and exercise.

The ONS releases its measure of inflation each month, showing how much these prices have risen since the same date last year. This is known as the Consumer Prices Index (CPI).

You may not notice price rises from month to month. But right now, prices across a number of areas are all rising very quickly.

In the 12 months to February, prices rose 6.2% on average. That means they are now going up at their fastest rate for 30 years.

But the OBR has suggested that the fallout from the war in Ukraine could push inflation to a 40-year high of 8.7% in the final three months of 2022.

The Bank of England has also warned that inflation could hit double digits if rising fuel prices mean the energy price cap goes up again when it next changes in October.

Credit: bbc.co.uk/news